7 Questions normally people ask about GST

1. What is GST?

GST is the short form for Goods and Services Tax. It’s basically a tax which is added to a portion of goods or services. In the real world, this tax is enforced on manufacturers, primary industry producers and as well as retailers.

The problem here is that all registered business that fits the requirements mentioned above are able to claim these input tax credit from the government. However, the individuals like you and us are not able to do so which in the end burdens your pocket.

2. How will you be affected?

As what answered in the first question, you basically need to pay more and get “almost” nothing in return.

3. Is this a new system that the Malaysian government came up with?

Many countries worldwide have embraced the GST as a replacement to a single-stage sales tax regime.

4. Why we need GST?

This new tax will increase the revenue for the government and as a result, it narrows down the fiscal deficit. Or in other words, it’s good for our economy. But that’s not for sure (If you know what we mean).

5. Will there be a corresponding fall in income tax to compensate?

The Malaysian government is currently working on a system to ensure that this whole GST will not affect the lower income group.

Ministry of Finance secretary-general Mohd Irwan Serigar has come on record to say the GST will be introduced as a package. However, there are no concrete details pending an official announcement.

Cash handouts in the form of BRIM (the 1Malaysia People’s Assistance Programme) next year have been promised to help soften the blow of subsidy rationalisation and the GST.

But considering the fact that the GST is designed as a revenue-neutral replacement tax, additional measures such as an adjustment to income or corporate taxes are considered unnecessary at this stage.

In the event a decision is made to implement a GST rate higher than the revenue-neutral rate of 4%, then the government may consider lowering income tax rates said Inland Revenue Board (IRB) director-general Mohd Shukor Mahfar in a press conference last month.

6. Does GST increase the cost of doing business?

Of course no. The burden eventually fall on the consumer.

7. Will the GST take more from the poor than the rich?

The rich are getting richer and the poor are getting poorer. In other words, the impact is simply higher for lower income individuals compared to the high income individuals.